Indicators are often considered as blessings for new traders. If you can learn to use the indicators in a proper way, you can easily avoid the false trade setups. Sadly, the new traders are always making mistakes since they don’t know the proper way to execute a trade based on the indicators reading. In fact, they use too many indicators with a hope to find great trades. Though there are thousands of indicators which you can use, today we are going to discuss the Bollinger band indicator. Some of you might say, you know the proper use of this indicator but hold on, there is a twist. Instead of using the indicator in the daily time frame, we will learn to use it in the 1-hour time frame. Once you read this article, you can easily execute high-quality trades using this technique.
Facts about 1-hour time frame
Before you start to trade the 1-hour time frame, you need to know some facts. Trading the 1-hour time frame is extremely risky and you need to be extremely precise with your trade execution. Without having complete control over the emotions you are bound to lose money. However, if you promise not to break any investment rules, you can easily make a huge profit by using the Bollinger band indicator in the 1-hour time frame.
Loading the indicators
If you load the Bollinger band in the indicator in the 1-hour time frame, you can easily spot the dynamic support and resistance level. But spotting those levels is not enough to ensure your profit. You have to rely on a simple price action confirmation signal to trade the upper and lower band. Before you dig deep into the price action signal, make sure you never use the Bollinger band indicator trading strategy in the event of high impact news. Most of the time the market tends to break above or below the dynamics levels on the event of such news. Even the pro traders who prefer CFD trading at Saxo stay in the sidelines during such events.
Use of multiple candlestick patterns
Some of you might think, you need to use the price action confirmation signal to trade the major bands. But do you really think this will help? If you trade the market by using the single candlestick pattern, chances are high you will lose money. You need to use multiple candlesticks to spot the potential entry and exit point. The pro traders prefer to use the bullish morning star and bearish even star pattern to trade the dynamic bands of this indicator.
Execution of the trade
Once you find the perfect trade setups at the dynamic levels of the Bollinger band indicator, you need to assess the risk-reward ratio. Your first take profit level would be the mid-band of this indicator. If the risk-reward ratio is less than 1:2 you should never execute the trade. Remember, you are trading the market using the dynamic support and resistance level. So, the chances are high that the market will break the dynamic levels without any prior notice. So, never trade the market with a 1:1 risk-reward ratio. In fact, the pro traders in the United Kingdom prefer to trade with 1:3+ risk-reward ratio since it allows them to recover their losses very easily.
Dealing with the losing trades
Though the 1 hour Bollinger band indicator trading strategy is extremely profitable, still you need to prepare yourself face the losing trades. Regardless of the market condition, you should never execute any trade with more than 2% risk. Learn more about risk management policy since it will help you to make a profit in the long run. If possible, use multiple time frame analysis to find out the long term prevailing trend. Execute the trade in favour of the market trend to reduce your risk factors.